Cromwell E-Reit proposes rent deferrals, monthly payments for tenants
Singapore
CROMWELL European Real Estate Investment Trust (Cromwell E-Reit) is proposing to offer tenants the option to pay their rent every month instead of every quarter. It may also allow payments to be deferred by one to three months in special cases, it said in a bourse filing on Wednesday.
This comes after 139 tenants, comprising 9.7 per cent of the Reit's annual rent roll, requested for rental payments to be deferred for one or two months.
The group comprises mostly small- and medium-sized enterprises such as cafes, childcare centres, and gyms, as well as the Reit's four-star hotel in Saronno near Milan, which is temporarily closed.
Cromwell E-Reit's manager is also mulling rent-free leases for tenants in exceptional cases as an incentive for an early lease extension or removal of break options.
All these options are subject to a thorough assessment of tenants' business and creditworthiness, the Reit's manager said, adding that Cromwell E-Reit had a number of insurance policies in place, including limited virus event coverage, which it is looking to utilise.
It has so far agreed to rental rebates for just one tenant: its sole cinema operator in Lissone. The cinema has been closed by government decree for the past seven weeks, resulting in a rent loss of 162,000 euros (S$251,428.55).
Last month, the Reit's manager had said that the Covid-19 outbreak was having a "minimal impact" on its income from properties in Italy and the wider European region.
Simon Garing, chief executive of the Reit's manager, said tenants typically pay their rents three to six months in advance, meaning the pandemic has not had a major impact on the Reit's cashflows.
"At this stage, we have not had to make blanket provisions for 'rent relief', nor are we offering across-the-board rent waivers," he said.
According to Mr Garing, the Reit is currently operating at "close to full potential within the constraints of the various 'lockdown' and 'circuit-breaker' measures". Its occupancy rate was 93.2 per cent as at Dec 31, 2019.
Andreas Hoffmann, the Reit manager's head of property, said he expects to see an improvement in tenant retention rates this year as a result of a large-scale retention programme launched prior to the outbreak. Its retention rate last year was about 60 per cent.
Tenants are also more likely to stay in their current premises as moving budgets are cancelled or frozen, Mr Hoffmann added.
He said that so far, none of the companies in the Reit's portfolio have gone bankrupt as a result of Covid-19.
In fact, light industrial and logistics tenants - which account for 40 per cent of the Reit's net property income - are expected to benefit from increased demand in e-commerce.
Several of the larger tenants, which are mostly operational, may also require more warehouse space, Mr Hoffmann added.
Given the stricter social distancing measures in Singapore, Cromwell E-Reit expects to hold its annual general meeting towards the end of June. It will put forward a buyback resolution at that time.
The Reit's manager is putting its transaction strategy on hold for the next few months, reducing expenses, and deprioritising non-essential capital expenditure.
Shane Hagan, the Reit manager's chief financial officer, added that it currently has over 200 million euros in cash reserves to tide it through the crisis.
Cromwell E-Reit's Singapore dollar-denominated units declined 0.9 per cent on Wednesday to end at 56.5 cents. The euro-denominated units closed the day flat at 36 euro cents.
